Australia Commits A$2.5B to keep Rio Tinto’s Tomago Aluminium Smelter Operating
Synopsis
Australia has announced a A$2.5 billion funding package to support Rio Tinto’s Tomago aluminium smelter beyond 2028, helping the facility transition to renewable energy while securing local jobs and manufacturing.
The Australian government has announced a A$2.5 billion (US$1.76 billion) support package to help keep Rio Tinto's Tomago aluminium smelter operating beyond 2028.
Tomago aluminium smelter is one of the country's most important industrial assets as it transitions from coal-fired electricity to renewable energy.
Jointly funded by the federal government and the New South Wales government, the package will support 3 gigawatts of new electricity generation and pave the way for a long-term renewable power supply.
Tomago which is Australia's largest electricity user had warned last year that it could be forced to shut down without access to commercially viable energy after its current power contract expires in 2028.
Under the agreement, Rio Tinto will also invest at least A$1.1 billion in upgrading and decarbonising the facility.
Renewable Power Agreement Aims to Secure Long-term Operations
As part of the package, Tomago Aluminium will enter a 10 year power purchase agreement covering 2029 to 2038, replacing its existing coal-powered electricity contract with AGL Energy which ends in late 2028.
The agreement is designed to deliver reliable and internationally competitive electricity prices while ensuring the smelter receives 100% renewable electricity from 2033.
Rio Tinto said the transition will reduce the plant's direct and indirect carbon emissions by approximately 25%. Thus, it will support both the company's climate goals and Australia's broader decarbonisation strategy.
Rio Tinto to Invest A$1.1B in the Smelter
Alongside government funding, Rio Tinto has committed to investing at least A$1.1 billion in the Tomago facility, including A$100 million dedicated to additional decarbonisation initiatives.
Rio Tinto Aluminium & Lithium Chief Executive Jérôme Pécresse said the agreement preserves Australia's sovereign manufacturing capability while ensuring Tomago remains competitive in supplying aluminium required for the global energy transition.
Aluminium has become increasingly important for industries such as electric vehicles, renewable energy infrastructure and lightweight manufacturing due to its strength and recyclability.
Energy Transition Poses Challenges for Heavy Industry
Tomago is one of several Australian metal smelters facing rising electricity costs as the country shifts away from coal-fired power generation.
Built decades ago to benefit from abundant, low-cost coal electricity, many of these facilities now require significant investment to remain competitive in a renewable energy system.
Governments have pledged more than A$5 billion in recent years to support major industrial sites, including Rio Tinto's Boyne smelter, Glencore's Mt Isa copper smelter, two Nyrstar smelters and the Whyalla steelworks. It highlights the strategic importance of Australia's metals sector.
According to the International Aluminium Institute, global primary aluminium production exceeded 72 million tonnes in 2025. The demand is expected to continue rising as clean energy technologies and electric vehicles require greater volumes of lightweight metals.
Tomago Remains a Major Employer and Industrial Asset
The Tomago smelter employs more than 1,000 full-time workers and around 200 contractors which makes it one of New South Wales' largest industrial employers.
Local media reports suggest the facility could source electricity from government-owned Snowy Hydro from 2028, although the company has not confirmed the arrangement.
Tomago Aluminium is an independently managed joint venture majority-owned by Rio Tinto, alongside Gove Aluminium Finance and Norsk Hydro. The new funding package is expected to provide greater certainty for the smelter's long-term future while supporting Australia's transition to cleaner energy.
Source: Reuters
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